IATA: Asia Pacific 3Q2016 financials show a 'solid improvement in operating margin'

IATA released (Jan-2017) its 'State of the Region Monitors: Asia Pacific' review of regional economics and airline performance. Key highlights include:

• Economics:
• • Business confidence fell in India for Jan-2017, likely due in part to the dislocation of the currency swap. Confidence in Indonesia remains soft despite robust economic activity & gains in consumer sentiment;
  • The USD strengthened 1.5% in Dec-2016, ending 2016 up 4.5% on a trade-weighted basis;
  • The JPY, KRW and AUD fell by 2% to 2.5% compared to the USD in Dec-2016;
  • The MYR declined 4.5% over 2016;
• Passenger market:
• • Asia Pacific airline RPKs grew 9.9% year-on-year in Nov-2016;
  • Indian domestic market PRKs grew 22.3% in Nov-2016 and "shows few signs of moderation", with growth up a little over 22% over 2016, bolstered by an increase in both the number of airport pairs and average flight frequencies;
  • Japanese domestic RPKs fell 0.5% for Nov-2016;
  • Australia domestic market rose a modest 1.8% in Nov-2016;
  • Across the main markets long haul market, the most notable performers were Asia-Nth America (+7%) and Asia-Middle East (+9.5%);
• Freight market:
• • In seasonally-adjusted terms, Asia Pacific carrier volumes have risen strongly over the past six months, returning to the levels reached in the aftermath of the global crisis in 2010;
  • This development is consistent with robust business survey outcomes observed in a number of countries, incl. Taiwan, Korea & Vietnam, in recent months. Within Asia traffic remains the standout amongst the large markets;
• Overall regional industry performance:
• • Asia Pacific carriers increased passenger capacity by a "hefty" 8.6% over the first 11 months of 2016, two percentage points faster than the overall industry average. Nov-2016 passenger load factor was 79.1%, just exceeding the 78.9% industry average;
  • Freight growth rates are broadly similar, with AFTKs up 4% for Asia Pacific carriers, slightly below the industry pace of 4.4%. Asia Pacific airlines are "the clear benchmark for freight loads", reaching 56.9% in Nov-2016, almost 10pp above the industry average;
  • 3Q2016 financials show a solid improvement in operating margin for the Asia Pacific carriers, up 2.5 percentage points year-on-year, to 10.7% currently. The industry-wide margin slipped a little over 2016 to 14.8% in Nov-2016, down 0.5 ppts;
  • Despite the upward trend observed in oil and fuel prices over 2016, passenger yields remain under pressure. Only Japanese domestic yields are above their level of a year ago (up 5.2%). In many markets, yields are still showing double-digit decline compared with a year ago. [more - original PR]